Chapter 1

The Financial Environment

The world economy is currently deeply mired in the most severe financial and economic crisis since the Second World War. At the end of 2008, most economies were experiencing the sharpest fall in consumer and business confidence in 20 years, on top of which, commodities had suffered their steepest decline since 1945. Despite enormous write-downs by banks in the United States and Europe, problems have not gone away and world gross product (WGP) is expected to contract by 2.6% in 2009 (3.9% in the developed economies).1 There is little evidence of any “loosening” in the financial markets despite governments pumping billions into the banking system and, consequently, companies of all sizes struggle to acquire ...

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